Memo

BILL NUMBER:S4532

TITLE OF BILL: An act to amend the tax law, in relation to the treatment of notices filed of the payment of mortgage recording tax on an instrument not entitled to be recorded

PURPOSE: To clarify that a notice filed under Tax Law, including a notice recorded under the authority of section 258-a, does not constitute notice to a bona fide purchaser of an interest in real property.

SUMMARY OF PROVISIONS: Section 1 of the bill amends section 258-a of the tax law by amending that section to provide that the filing or recording of a notice of payment of tax is Ineffective to give notice under Article 9 of the real property law of an estate or interest in the real property affected by the instrument on which tax is being raid or to create a duty or inquiry with regard thereto. This amendment would take effect immediately and shall apply to notices now or hereafter filed or recorded under section 258-a

JUSTIFICATION: Under Tax Law Section 256-a, when mortgage recording tax is being paid on an instrument not entitled to be recorded, but which is not lost or destroyed, the tax may be paid to the recording officer. A copy of the instrument upon which tax is paid "shall be filed with the recording officer and preserved among his mortgage tax records." If, however, the unrecorded instrument has been lost or destroyed the State Department of Taxation and Finance determines the amount of tax due and "by order authorize the recording officer to receive and receipt for the tax as fully and with the same force and affect, as far as this article is concerned, as if the instrument has been duly recorded and the tax thereon paid." Section 258-a does not require a recording officer to record a Section 258-a notice. Accordingly, the section does not deal with issues of actual or constructive notice to a bona fide purchaser if a Section 258-a notice is recorded.

However, if a Section 258-a notice is recorded, as has recently been done in a number of counties, the holder of the related, unrecorded instrument may assert the priority of its lien claiming that an otherwise bona fide purchaser for value has, by reason of the recording of the Section 258-a notice, actual or constructive notice of the instrument to which the notice relates. In addition to the litigation that is likely to ensue until the courts rule on whether the recording of a Section 258-a notice is notice under the Recording Act or even appropriate to record, the recording of a Section 258-a notice will impact the marketability of the title to real property against which Section 258-a notices are recorded.

LEGISLATIVE HISTORY:; This is a new bill.

FISCAL IMPLICATIONS: None.

EFFECTIVE DATE: Immediately and shall apply to notices now or hereafter filed.

Text

STATE OF NEW YORK
________________________________________________________________________
4532
2013-2014 Regular Sessions
IN SENATE
April 8, 2013
___________

Introduced by Sen. FLANAGAN -- read twice and ordered printed, and when
printed to be committed to the Committee on Investigations and Govern-
ment Operations
AN ACT to amend the tax law, in relation to the treatment of notices
filed of the payment of mortgage recording tax on an instrument not
entitled to be recorded
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Section 258-a of the tax law, as amended by chapter 218 of
the laws of 1930, is amended to read as follows:
S 258-a. Payment of tax on instruments not recorded. An instrument
taxable under this article but which is not entitled to be recorded, may
nevertheless be presented to the recording officer of the county in
which the real property or any part thereof affected by said instrument
is situated, and there may be paid to such officer the amount of the tax
which would be payable under this article on the recording of such
instrument if the same were entitled to be recorded. Such officer shall
receive such amount and such payment shall have the same force and
effect, so far as this article is concerned, as if such instrument had
been duly recorded and the tax thereon paid. It shall be the duty of the
recording officer to indorse upon the instrument a receipt for the
amount of the tax so paid. A copy of each instrument upon which the tax
is paid as above provided shall be filed with the recording officer and
preserved among his mortgage tax records.
Where an unrecorded instrument subject to the tax imposed by this
article has been lost or destroyed, the tax commission, upon presenta-
tion of proper proofs, may determine the taxable amount of such instru-
ment and by order authorize the recording officer to receive and receipt
for such tax as fully and with the same force and effect, so far as this
article is concerned, as if the instrument had been duly recorded and
the tax thereon paid.

EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD08352-01-3

S. 4532 2

THE FILING OR RECORDING OF A NOTICE OF THE PAYMENT OF TAX UNDER THIS
SECTION IS INEFFECTIVE TO GIVE NOTICE UNDER ARTICLE NINE OF THE REAL
PROPERTY LAW OF ANY ESTATE OR INTEREST IN THE REAL PROPERTY AFFECTED BY
THE INSTRUMENT ON WHICH TAX IS BEING PAID OR TO CREATE A DUTY OF INQUIRY
WITH REGARD THERETO.
S 2. This act shall take effect immediately and shall apply to all
notices filed prior to and on and after such effective date.

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